Highmark didn't breach West Penn Allegheny agreement, judge rules

Email Newsletters

Daily Photo Galleries

Traveling by Jeep, boat and foot, Tribune-Review investigative reporter Carl Prine and photojournalist Justin Merriman covered nearly 2,000 miles over two months along the border with Mexico to report on coyotes — the human traffickers who bring illegal immigrants into the United States. Most are Americans working for money and/or drugs. This series reports how their operations have a major impact on life for residents and the environment along the border — and beyond.

Negotiations between Highmark Inc. and West Penn Allegheny Health System could restart as early as next week since an Allegheny County judge ruled on Friday that the insurer did not breach its $475 million affiliation agreement with the hospital network.

Common Pleas Judge Christine Ward granted Highmark's request for a preliminary injunction, which prohibits West Penn Allegheny from searching for other suitors in a quest to remain financially solvent.

In her ruling, Ward said Highmark would have sustained “irreparable harm that cannot be assigned a dollar amount” without the West Penn Allegheny partnership. The state's largest insurer has given West Penn Allegheny $230 million in grants and loans.

Leaders of the struggling hospital network had vowed to talk to other organizations about a partnership after they said Highmark threatened to take the system to bankruptcy to restructure about $1 billion in debt.

Highmark officials issued a statement saying they are pleased with the ruling and intend to resume negotiations immediately. A spokesman, however, could not say if any meetings had been scheduled or if anyone from Highmark had called West Penn Allegheny.

“We look forward to meeting with WPAHS immediately to develop an appropriate financial restructuring plan or an alternative proposal that benefits patients, employees and the community and that addresses the Pennsylvania Insurance Department's concerns about the short-term and long-term financial condition of WPAHS,” Highmark spokesman Michael Weinstein said in a statement.

West Penn Allegheny officials said they were disappointed by the court's decision.

“As we have said from the beginning, we believe that Highmark is a good partner for WPAHS,” board Chairman Jack Isherwood said in a statement. “We look forward to engaging in constructive dialogue with them as soon as possible regarding the best way to move forward.”

Highmark wants to acquire West Penn Allegheny as part of a $1 billion, integrated, health care delivery network to compete with UPMC, the region's largest medical provider.

Highmark sued West Penn Allegheny after the system's board of directors claimed the insurer's CEO, William Winkenwerder, told them that “the original affiliation is history.”

“This court finds that while WPAHS's interpretation of Dr. Winkenwerder's statements is not wholly unreasonable, we find that Dr. Winkenwerder's statements reflect tactical threats made as a form of negotiation,” Ward wrote in her opinion.

The dispute played out in court during a four-day hearing that concluded Nov. 2 in which Highmark and West Penn Allegheny executives testified about the strained relationship.

Both parties agreed on one thing: The financial state of the region's second-largest hospital network is precarious at best.

In court documents filed on Thursday, Highmark said West Penn Allegheny “refuses to confront reality” and has a viable future only if it teams with a strong partner. The hospital network posted operating losses of $112.5 million in fiscal year 2012, which ended June 30. The amount was higher than what management projected. The hospital system is projected to lose $116.8 million during the current fiscal year, the court documents show.

The state Insurance Department has raised concerns about West Penn Allegheny's ability to repay its huge debt. Insurance officials, who must approve the deal, were reviewing the judge's ruling, said department spokeswoman Rosanne Placey.

The feud between the potential partners prompted physicians across the hospital network to sign a petition asking the system's board of directors to remove the interim executive management.

The health system's contract with the management firm, Alvarez & Marsal, expired on Tuesday but has been extended, West Penn Allegheny spokeswoman Kelly Sorice said. She could not immediately provide the terms.

Even if a breach had occurred, the agreement requires West Penn Allegheny to notify Highmark and give the insurer 30 days to make corrections, Ward ruled.

Highmark likely would have succeeded in proving that West Penn Allegheny violated an exclusivity agreement that blocked the health system from shopping for other partners. Interim CEO Keith Ghezzi testified during the hearing that the system has “received significant expressions of interest” since Sept. 28, when the health system called a press conference to announce the breach.

Luis Fábregas is a staff writer for Trib Total Media. He can be reached at 412-320-7998 or lfabregas@tribweb.com.

TribLive commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments  either by the same reader or different readers.

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

Total Promotional Solutions

A division of Trib Total Media is your one-stop-shop for all of your branded merchandise needs.

We specialize in providing quality affordable promotional products for every type of business including non-profits, schools, universities, sports teams and more. With 1000’s of products to choose from, our knowledgeable staff can help you find the perfect apparel item or product to suit your needs and budget.

Digital Sales

We offer a wide variety of traditional and new digital advertising options customized to fit your needs!

Whether you're just starting out, or you've been a keystone in the community for years, our knowledgeable staff can provide you with a customized package including online banners/advertisements, Social Media Marketing (Facebook / Twitter), Website development, Search Engine Optimization, Email Marketing solutions and much more!

Contact your local sales rep today for details, personalized proposal and a meeting to discuss how we can meet your needs.